FINANCE

Bankruptcy legislation one year later

Judy Collins

Published: Thursday, November 30, 2006 at 6:30 a.m.

Last Modified: Thursday, November 30, 2006 at 12:00 a.m.

It's been just over a year since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 took effect. This legislation has the potential to create a positive impact on consumers through its requirement for pre-filing counseling and pre-discharge education.
The National Foundation for Credit Counseling (NFCC) surveyed its member agencies nationwide regarding the impact of the legislation's first year. They've detailed the results in a report titled Consumer Counseling and Education Under BAPCPA the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 One Year Report. You can read the entire report at www.NFCC.org.
Here are a few interesting points:
Due to a "tidal wave of bankruptcy filings" just prior to the act taking effect, filings following the implementation of the legislation numbered far fewer than the norm. While a typical average month's filings would have equaled somewhere between 130,000 and 150,000, filings in October 2005 numbered nearly 620,000. According to the report, filings for all of 2006 are projected to reach 600,000 which report states is, "the lowest level in almost 20 years." However, the NFCC does not expect the current low level of bankruptcy filings to continue. The report states that 563,494 bankruptcy counseling and education sessions were delivered by NFCC member agencies during the law's first 11 months.
Financial desperation is common & not surprising, but frightening when you consider that agencies reported nearly 67 percent of those requiring bankruptcy counseling said the reason for their problem was "poor money management/excessive spending." According to the report the, average unsecured debt exceeded average annual income by $11,599.
Financial difficulty for this reason is completely preventable through proper financial education at home and school. In my work as education director of a credit counseling agency, I know that techniques for practicing financial responsibility aren't difficult, they just need to be taught and then used before people reach the point of no return.
The financial counseling sessions required before filing bankruptcy and personal financial management course required before a bankruptcy is discharged should help prevent a repeat of the behavior that created the need for filing in the first place. However, counseling received long before poor financial habits are ingrained could prevent financial chaos, family discord and build an understanding of proper budgeting, spending and credit use.
Reduced income/unemployment was the next most common reason (29.3 percent) cited for financial crisis. This is not surprising. Sudden income loss will throw people into financial chaos. However, planning for such an event can help people through the tough times.
Of the agencies responding to the survey, 42 percent indicated between 27 and 100 percent of the pre-filing clients were delinquent with their mortgages.
The report recognized the need for new tools to measure the effectiveness of the education now required by legislation. It will be interesting to see, over time, how effective the counseling/education components of the legislation prove to be.Contact Judy Collins, education director for Consumer Credit Counseling Service of Mid-Florida, at 867-1865, Ext. 130, or jlbcollins@mindspring.com.

It's been just over a year since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 took effect. This legislation has the potential to create a positive impact on consumers through its requirement for pre-filing counseling and pre-discharge education.<BR>
The National Foundation for Credit Counseling (NFCC) surveyed its member agencies nationwide regarding the impact of the legislation's first year. They've detailed the results in a report titled Consumer Counseling and Education Under BAPCPA the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 One Year Report. You can read the entire report at www.NFCC.org.<BR>
Here are a few interesting points:
Due to a "tidal wave of bankruptcy filings" just prior to the act taking effect, filings following the implementation of the legislation numbered far fewer than the norm. While a typical average month's filings would have equaled somewhere between 130,000 and 150,000, filings in October 2005 numbered nearly 620,000. According to the report, filings for all of 2006 are projected to reach 600,000 which report states is, "the lowest level in almost 20 years." However, the NFCC does not expect the current low level of bankruptcy filings to continue. The report states that 563,494 bankruptcy counseling and education sessions were delivered by NFCC member agencies during the law's first 11 months.<BR>
Financial desperation is common & not surprising, but frightening when you consider that agencies reported nearly 67 percent of those requiring bankruptcy counseling said the reason for their problem was "poor money management/excessive spending." According to the report the, average unsecured debt exceeded average annual income by $11,599.<BR>
Financial difficulty for this reason is completely preventable through proper financial education at home and school. In my work as education director of a credit counseling agency, I know that techniques for practicing financial responsibility aren't difficult, they just need to be taught and then used before people reach the point of no return.<BR>
The financial counseling sessions required before filing bankruptcy and personal financial management course required before a bankruptcy is discharged should help prevent a repeat of the behavior that created the need for filing in the first place. However, counseling received long before poor financial habits are ingrained could prevent financial chaos, family discord and build an understanding of proper budgeting, spending and credit use.<BR>
Reduced income/unemployment was the next most common reason (29.3 percent) cited for financial crisis. This is not surprising. Sudden income loss will throw people into financial chaos. However, planning for such an event can help people through the tough times.<BR>
Of the agencies responding to the survey, 42 percent indicated between 27 and 100 percent of the pre-filing clients were delinquent with their mortgages.<BR>
The report recognized the need for new tools to measure the effectiveness of the education now required by legislation. It will be interesting to see, over time, how effective the counseling/education components of the legislation prove to be.<BR>
<i>Contact Judy Collins, education director for Consumer Credit Counseling Service of Mid-Florida, at 867-1865, Ext. 130, or jlbcollins@mindspring.com.<BR></i>